CHAPTER THIRTEEN - ESCAP

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INTRODUCTION

In the building of a common understanding ofthe concept of “sustainability” and a practicableconsensus on the implications of seeking to achieve“sustainable development”, the private sector has akey role to play, both in terms of redefining corporateobjectives (and market behaviour) and in using theprivate sector’s considerable influence on economicgrowth, employment creation and environmentalprotection to promote and defend the goal ofsustainable development.

Like other parts of the world, the role ofbusiness and industry in the promotion of sustainabledevelopment in the Asian and Pacific Region hasenhanced with time and continues to grow withglobalization and trade liberalization. This chapterevaluates the status and trends apparent in theinteraction of the private sector with environmentalissues and of the sector’s contribution towardssustainable development in the region.

GREENING OF BUSINESS:STATUS AND TRENDS

In many countries of the Asian and PacificRegion, the proliferation of environmental companiesand the increasing number of initiatives beingundertaken by both existing and new businesses andindustrial enterprises attest to the growing role ofthe private sector in the provision of solutions toenvironmental challenges.

In addition to the direct involvement inso-called eco-business, (i.e. providing environmentalgoods and services), the private sector’s contributionin cleaner production and environmental research anddevelopment (R & D) has expanded considerably.Private sector participation, either directly or throughPublic-Private Partnerships (PPP), is growing in arange of environmental management sectors,

including waste management; water supply andsanitation; integrated resource management andenergy planning and development. Elsewhere theprivate sector is actively promoting energy and/oreco-efficiency; technological substitution of CFC’s;management systems and standards for the greeningof business and industry; green investment andfinancing; and new marketing strategies for thepromotion of environmental goods and services aswell as codes of conduct for business and industry.

A. Eco-business, Environment Markets andFinancing

1. Eco-businessIn terms of eco-business, companies and

corporations in, for example, Australia, India,Indonesia, Japan, Malaysia, Republic of Korea,Singapore, Sri Lanka and Thailand are increasinglyproviding pollution abatement and remediationtechnologies, technical assistance and advice onenvironmental issues and environment-linkedengineering and consultancy services (Table 13.1).The governments of these countries have recognizedthe trade and export opportunities associated withenvironmental management expertise and haveinitiated programmes to assist in the development ofthe export potential of their domestic environmentalgoods and services firms. In Singapore, for example,tax incentives, research grants, trade missions andexhibitions are promoted and planned to make thecity-state a development and distribution centre forenvironmental equipment and services to othercountries in the region. Singapore’s Ministry ofEnvironment has also set up a company to marketits own expertise and technology to other countriesin the region.

The growing trend towards the privatizationof environmental services such as water supply,sanitation and solid waste management is alsocontributing to the development and strengthening

Table 13.1 Companies/Agencies Involved in Environment-Business in Asia and the Pacific

Country No. of Country No. of Country No. of Country No. of Country No. of Country No. of Country No. of Country No. of

companies companies companies companies companies companies companies companies

Australia 145 Bangladesh 6 Cambodia 1 PR China 39 Fiji 2 Hong Kong, 45 India 203 Indonesia 57China

Malaysia 55 Maldives 1 Nepal 5 New 18 Pakistan 20 Philippines 39 The 25 Singapore 78Zealand Russian

Federation

Islamic 7 Japan 172 Kazakhstan 2 Republic 59 Sri Lanka 13 Thailand 54 – – Viet Nam 3Republic of Koreaof Iran

Source: Eco Services International 2000

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of environmental enterprises. Consumer cooperativeshave become a powerful force in Japan to popularizegreen products, while local governments haveprogressively provided technological and financialsupport to small- and medium-sized companies. Theregion’s environment industry, however, has yet toplay a significant role in the international businessmarkets. For instance, of the top 50 grossingenvironmental companies worldwide, only 10 percent are from the region; and all of these are fromJapan (Table 13.2). Nonetheless, the growth innumbers of small and medium environmentindustries in the countries of the region is quitesignificant, and the current Eco-Services directoryshows over 1 000 environmental enterprises in thetwenty-four countries within the region that haveentries.

2. The Environmental MarketWith the growth in environmental consciousness

and awareness, the region’s potential market forenvironmental goods and services continues toexpand. For example, People’s Republic of China’sdirect investment in the prevention and control ofenvironmental pollution was over US$10 billion in1998, whilst, according to OECD, the regional marketin environment-related businesses in 1998 was aboutUS$80 billion and is expected to exceed US$110 billionby 2010. Japan already has the second largest nationalenvironmental market in the world with a market ofover US$60 billion and the environmental market inthe countries of Southeast Asia is expected to growat the rate of 14 per cent per year.

The potential environmental market may bemuch larger than the estimates given theunderestimation of the potential of some aspects andthe exclusion of future “probable markets”. Forexample, the requirements of the Kyoto Conference

are likely to result in countries introducing morestringent controls on the management of methaneemissions. The two main sources of methanegeneration (that are amenable to interventivemanagement) are from agricultural wastes and fromwaste landfills; both of these provide marketopportunities for the installation of gas capturefacilities and the installation of biogas-fired energygenerators. Similarly, opportunities are likely to arisefor the enhancement of the quality of treated effluentas organic fertilizer for use in agriculture-irrigationschemes. The size of the potential market may alsohave been underestimated for analytical services andfor instrumentation and information, particularlywith the trend towards public sector agenciesoutsourcing or privatizing their supportive andnon-regulatory functions.

The provision of bilateral and multilateral aid,the availability of “soft” environmental loans and thegrowth of environmentally friendly and ethicalinvestments have also played a significant role inenhancing environmental markets. A large portionof the disbursed loans, grants and donor agencyfunding has been aimed at improving industrialefficiency, water supply and sanitation facilities,afforestation, waste management and naturalresources management. For example, the AsiaSustainable Growth Fund, sponsored by the ADB,aims to raise US$150 million to invest as long-termcapital for environmentally sound companies in thedeveloping countries of the Pacific rim and the OECD,ADB, World Bank and international financial marketshave provided numerous allocations of developmentassistance for environmental investments.

3. Green Investment and FinancingThe “greening” of the financial markets is often

seen as a key challenge associated with achievingsustainable development. As financial institutions,such as joint stock companies, banks, insurancecompanies and financial management firms, beginto take environmental factors into fundingconsiderations, private sector attitude andperformance towards sustainability will improve. Inthe longer term, it is argued, business will see theinherent convergence of investments that achieve bothfinancial and environmental sustainability.

Some initial, tentative steps have been takenby a number of the region’s governments toencourage private sector institutions and associationsin the adoption of environmentally sustainablebusiness practices.

(a) Private Sector InvestmentThere is a discernible overall trend in the East

Asian and Pacific Region of growth in private sector

Table 13.2 World Rank of Revenues from SelectedJapanese Environment-relatedCompanies, 1995

World Rank Environment-related Company1995 Revenue(US$ billion)

7 Mitsubishi Heavy industries 2 350(Incineration, Air PollutionControl and Water Equipment)

9 Ebara Corporation (Water and 2 200Incineration Equipment)

27 Kurita Water Industries 900(Equipment)

44 Hitachi Zosen 602

47 Kubota 558


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investment as a proportion of GDP (Figures 13.1 to13.3). In the wake of increasing investment needsand against a background of declining governmentalresources, analysts believe that the demand forprivate investment will expand significantly in thefuture. According to the ADB, over the next 30 yearsthe accumulated demand for infrastructureinvestment within the region as a whole will exceedUS$10 trillion and that the countries of Asia will bespending about US$1.5 trillion on infrastructurebetween 1995 to 2005 alone. The scope for privatesector investment in these infrastructure projects isexpected to expand substantially in coming years(Box 13.1).

Whilst the proportion of this investment thatwill be environmentally focussed is unclear, theincreasing profile given to environmental assessmentduring the planning stage of new infrastructure and,more importantly, the requirements for themanagement of environmental issues during projectimplementation and operation will ensure that the“green element” in these investments will continueto rise. In addition, the growth in the privatizationof environmental services will ensure that the privatesector will increasingly be environmentally drivenas can be seen from the experience to date of privatesector participation in water supply and sewageprojects (Figure 13.4).

(b) Green FundsIn recent years, the financial markets have

increasingly sought to capture and quantify theenvironmental risks associated with certain industriesand to offer to investors sufficient information toenable the markets to differentiate on the basis ofenvironmental performance. In Japan, for example,five major funds (see Table 13.3.) have been createdfor this purpose. These funds have so far attracted190 billion yen (about US$1.75 billion), a rate ofgrowth that far surpasses the rate of emergence ofsimilar eco-funds in the US and Europe. In additionto these funds, several other leading Japanesefinancial institutions are in the process of startingtheir own green funds.

Green funds differ from the bulk of theso-called SRI (socially responsible investment) fundsthat emerged in the western markets in the early tomid 1970s. The Japanese green funds, for example,identify candidate investment ventures on financialcriteria, and stringent environmental performancecriteria are applied to screen the suitability of stocksfor the fund. Unlike the ethical funds of 20-30 yearsago, which were marketed and managed by smallniche players, the present day green funds areoperated by Japan’s leading financial institutions.This has had two separate consequences. Firstly, it

Figure 13.1 Private and Public Investment in EastAsia and the Pacific

Sources: World Bank 2000

Remarks: The countries in East Asia and the Pacific include AmericanSamoa, Cambodia, People’s Republic of China, Fiji, Indonesia,Kiribati, Democratic People’s Republic of Korea, Lao People’sDemocratic Republic, Malaysia, Marshall Islands, Micronesia(Federated States of), Mongolia, Myanmar, Palau, Papua NewGuinea, Philippines, Samoa, Solomon Islands, Thailand, Tonga,Vanuatu and Viet Nam.

30

25

20

15

10

5

0

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997

Per cent of GDP

Private investment Public Investment

Figure 13.2 Private and Public Investment in SouthAsia

Sources: World Bank 2000

Remarks: The countries in South Asia include Afghanistan, Bangladesh,Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka

Per cent of GDP

0

2

4

6

8

10

12

14

1997199419911988198519821979197619731970

Private investment Public Investment

Figure 13.3 Total Investment in Energy ProjectsWith Private Participation inDeveloping Countries by Region,1990-99

East Asiaand the Pacific

Middle Eastand North Africa

Europe and Central Asia

South AsiaSub-Saharan Africa

Bill

ions

of 1

998

US$

25

20

15

10

5

01990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Latin America and the Caribbean

Source: World Bank 2000, PPI Project Database

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Box 13.1 Private Investment in Infrastructure

Recent trends have shown encouraging growth in private investment in infrastructure, but not nearly enough to meet theestimated $1.2-1.5 trillion needed over the next decade. Data from 1996 show that the annual private investment flows to East Asianinfrastructure projects-from both international and domestic concerns-has reached between $13-16 billion, accounting for 12-18 percent of all infrastructure investments. This is a noticeable improvement but well short of what is necessary for the region to sustainlong term economic growth and competitiveness, improve quality of life and continue the momentum toward a greater role in theglobal economy. Among countries that received the most investment were Indonesia, the Philippines and People’s Republic ofChina. The lack of bankable, low-risk projects combined with the limits of long-term financing and the weakness of domestic capitalmarkets are the main reasons for the relatively low private sector involvement.

A World Bank study, Some Choices for Efficient Private Provision of Infrastructure in East Asia, which came out as a result ofa high-level infrastructure conference held in Jakarta in 1996, presented policymakers and the private sector with an overview of thechallenges and trade-offs they face in the provision of infrastructure. These challenges include strategic approaches to privateinvolvement, regulatory choices, different methods of contracting private suppliers, management of environmental and resettlementproblems when the private sector takes the lead and new ways of financing private infrastructure. Both ministers and private sectorexecutives at the Jakarta meeting agreed that the region can and should aim to increase private sector investment to 30 per cent of thetotal in the next five years. To address the remaining impediments to private participation, deeper reforms are needed to create aprivate sector-friendly environment, such as improving methods of contracting with private parties, building regulatory capacityand developing domestic markets. The urgency of undertaking these reforms has assumed greater importance as a result of theAsian economic crisis of the late 1990s.

Private sector involvement in infrastructure financing involves a set of core principles (transparent processes, stable rules, pricereforms, maximum competition and incentive-based regulatory structures) that each country, despite the differences in sectors anddemands, can adapt to suit to its particular needs. Lessons that have emerged from policymaker discussions show that certainpreconditions must exist to ensure the sustainability of private investment in infrastructure projects. These specify that the publicmust be willing to pay for the proposed projects, that government subsidies or support should be transparent and that privateprojects must be bankable. Countries need to create the environment to meet these preconditions and may need to implement pricereforms, regulatory and legal framework reforms and actions to encourage competition, increased accountability, and capital marketdevelopment. This will improve the financial viability and profits of infrastructure projects, increase competition and transparencyin contracting and reduce the risks of investing in the sector.

Source: www.worldbank.org/html/extdr/extme/ampr_003.htm

Table 13.3 Green Financing in Japan

Top Ten Nikko Eco Fund Yasuda Green Open UBS /JRI Eco-fund IBJ/Daiichi Life Partners InvestmentInvestments Eco Fund Eco-Partners

1 NTT DoCoMo Sony NTT DoCoMo NTT DoCoMo NTT DoCoMo(5% of fund)

2 Fuji Television Toyota Toyota Sony Sony(4% of fund)

3 Toyota (3% of fund) Fujitsu Sony Toyota Fujitsu support

4 NTT (3% of fund) Matsushita NTT Seven Eleven Japan Takura Shuzo

5 Rohm (3% of fund) Takeda Chemical Seven Eleven Japan NTT Yokogawa

6 Murata Mftg NEC Fujitsu Fujitsu NTT Data

7 Sony Rohm Matsushita Rohm Ebara

8 Takura Shuzo Matsushita Sumitomo Bank Murata Mftg Matsushita

9 Seven Eleven Japan NTT NEC Sumitomo Bank Seven Eleven Japan

10 Nikon Kao Rohm Matsushita Kirin Beer

Fund Total 130 billion 16 billion 9 billion 35 billion(Yen, as of2/2000)


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explains the swift uptake of the funds in Japan andsecondly, the pressure applied to high financialperformers to improve their environmentalperformance rating and thereby attract investors isall the more persuasive as it comes from within thefinancial markets establishment.

However, none of the Japanese green fundshas yet insisted that certain sectors or companies beactively shunned on environmental of health grounds(e.g. tobacco, nuclear power, and forestry).Nevertheless, as the competition in the green fundmarket heats up and differentiation becomesincreasingly difficult, it is likely that negativeenvironmental performance ratings will begin tocome to the fore in investment decision-making,thereby adding the punishment of poor performersto the current investment market criteria.

Direct support to the business sector in theirshift to sustainable development has been providedthrough private sector schemes that increase the flowof investments to such industries. In Australia, forexample, a superannuation fund is investingexclusively in environmentally friendly companiesto encourage corporations to “go green”. With assetsof Aus$2.2 billion, the Hesta super fund for healthand community service workers gives its 400 000members an investment option that allows them thechance to encourage companies to become “green”.Hesta invests in what it considers the best“Eco-performing” companies that are successful andhave environmentally friendly practices.

Elsewhere within the region, the financial sectorhas been slow to bring environmental criteria intothe formal investment decision-making system, evenat the most basic level. For example, Malaysian banksand insurance companies have no formal policies onthe environmental risks (and direct financialliabilities) associated with contaminated land and no

assessment is made of land that is offered as collateralon investment loans. Similarly, insurance companiesin Malaysia have yet to classify contaminated landas being of a higher risk than other type of land.Whilst Malaysia has been used for illustrativepurposes, the same pattern of inadequate ornon-existent environmental scrutiny of investments,even on issues that have direct financial implications,is found throughout the region.

(c) Green LoansThere are a number of global green funds that

are exclusively directed at environmentalprogrammes. For example, under the MultilateralFund of the Montreal Protocol, People’s Republic ofChina received US$105.6 million to support 173projects for its industries to shift to non-ODS (ozonedepleting substance) technologies and, thereby,achieve the phasing out of 32 000 tonnes of ODS.Similarly, in the Philippines 51 private sector firmsreceived a total of some US$17.2 million to shift tonon-ODS technologies and, thereby, phase out some1 600 tonnes of ODS.

At the country level, a number of governmentshave encouraged the utilization of clean productionprocesses by giving incentives which, in Pakistan,has included preferential treatment in loan facilitiesby banks and development finance institutions andlower import tariffs on pollution abatementequipment. In Sri Lanka, a range of soft loan schemesfor environmental improvements, pollution controland resource-efficient technologies are available, suchas the e-friends soft loans scheme offered to the privatesector by the National Development Bank of SriLanka. In the Republic of Korea, the government hasextended long-term, low-interest loans to companiesthrough the Industrial Development Fund and theEnvironmental Pollution Prevention Fund for theestablishment of facilities to treat, prevent or recyclepollutants (Republic of Korea Report to the CSD).

B. Clean Production: Research andDevelopment (R & D)According to a recent survey in Japan, 90 per

cent of companies with listed stocks and 20 per centof unlisted companies are developing some formof Eco-business or are funding research anddevelopment in the Eco-business sector (Figure 13.5).Similarly, in the Republic of Korea a number ofindustrial sectors have established research institutesfocusing on the development of new environmentaltechnologies. An encouraging trend within theR & D activities reviewed below, is the setting ofEco-efficiency targets by Asian companies, which farexceed the environmental performance standardsestablished by their respective governments.

Figure 13.4 Private Participation in Water andSewerage in Developing Countries1990-97

Source: World Bank 2000

Middle East and North Africa 13%

Europe and Central Asia 6%

Sub-Saharan Africa0%

Latin America andthe Caribbean48%

East Asia andthe Pacific

33%

Total investment

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1. Waste Reduction and RecyclingA key focus of the “environmental

restructuring” that companies are currentlyundertaking is the development and implementationof cleaner production technologies, processes andmanagement rationales. One of the main areas thathas successfully demonstrated the financial benefitsof environmental investments is waste management,where a number of industries have achievedconsiderable savings in operating, materials andenergy costs by adopting a range of measuresincluding reduction at source, maximizing materialrecovery for reuse or for sale to the growing recyclingsector. Waste exchange is also being promoted in anumber of countries and territories, including thePhilippines and Hong Kong, China, whereby wastefrom one industry becomes the raw material foranother, whilst in Australia and New ZealandWaste-Wise programmes have been initiated(Box 13.2).

Further examples of private sector initiativesin the waste management sector are presented inChapter 8.Source: 1) Survey on Environment Friendly Corporate activities

2) Environment Agency of Japan 1996

Figure 13.5 Status of Eco-business in Japan 1996

Box 13.2 Construction Companies and the WASTE -WISE Programme in Australia and New Zealand

Australia and New Zealand generate enormous amounts of construction and demolition (C & D) waste; in Melbourne alone,some 4.18 million tonnes of C & D waste is generated each year.

The WASTE -WISE Programme was designed to reduce the amount of the construction waste going to landfill, thereby extendingthe life of landfills and reducing the costs of wastage to the construction industry. In the first phase of the Programme, five leadingAustralian construction companies volunteered to work with the Australian and New Zealand Environment and ConservationCouncil to develop waste reduction, recycling and reuse best practice guidelines.

The Programme identified and addressed the technical and behavioural barriers to efficiently and economically reducingwaste. As a result a significant volume of building material waste, including concrete and steel, are now being reused and recycled.The companies participating in phase one of the programme found that waste reduction practices improved their commercialprospects both in Australia and overseas. New jobs were created and increased profits were made through the processing andmarketing of recovered construction waste. Participating companies also found that good waste management practices positivelyinfluenced the companies work practices and corporate identity. The achievements of the participating companies (Bovis LendLease, Multiplex, John Holland, Fletcher Construction and Barclay Mowlem) were as follows:

• Bovis Lend Lease Pty Ltd. recycled 98 per cent of the waste material arising from the State Office Block site in Sydney and90 per cent of the company’s waste concrete and steel was sent to recycling centres.

• Multiplex recycled 60 per cent of site waste at the Homebush Bay Olympic Stadium site between April and August 1997, andestablished an innovative concrete re-use system where 32 000 cubic metres of concrete was crushed and then reused on site.

• John Holland reused or recycled 760 000 kilograms of building material on John Holland sites in one year.

• Forty-three per cent of waste from the Dandenong Police and Court Buildings site was reused or recycled by Fletcher Construction,thereby saving 55 per cent of its waste removal costs.

• At the Vantage Apartments site in Queensland, Barclay Mowlem, 55 per cent of the timber and wooden formwork wasrecovered and recycled and, across all operations, waste materials such as concrete, bricks, sand, gravel, soil, steel, metalframing and roofing was collected and sent to recycling facilities.

By reducing the amount of construction waste going to landfill, companies participating in the WASTE WISE Programme made asignificant and measurable impact and set the scene for an expansion of the programme to other parts of the Australian and NewZealand construction industry.

Source: WASTE-WISE Construction Programme website www.environment.gov.au/epg/wastewise

0.0 20.0 40.0 60.0 80.0 100.0%

1.7 1.7 2.1

30.8 10.5 17.2 25.0 11.0

11.3 5.3 17.5 33.3 23.8 5.0

1.4 2.4

Companies withlisted stock

Companies withnon-listed stock

Provide business development, services or products

Planning to provide services or products

Conducting research/development

Would like to start eco-business

Contributor to eco-business as a client

Don’t know

Others

Unknown

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2. Green ProductsConsumer pressure has led to the private sector

investigating the production of sustainable products,both for their respective domestic markets and forthose products that are exported to the west.However, those industries that operate withinmarkets where little consumer pressure is appliedshow little sign of restructuring. For example, eachday over one million people in Hong Kong, Chinaand billions in Mainland China use expandedpolystyrene food containers that are disposed of tolandfill and open dumps. In response, a Hong Kong,China-based company, “Join-in Green Products,” hasdeveloped a range of biodegradable tableware madefrom a composite of grass and sugarcane pulp. Theproduct decomposes in less than three months andhas earned the company a gold prize at Hong Kong,China’s first Eco-Products Awards. However,resistance from the restaurant trade and, moresignificantly, reaction from the existing private sectormanufacturers and suppliers of the expandedpolystyrene containers have ensured a very slowuptake of the new “green alternative”.

In other sectors, greater success has beenachieved in introducing new alternative technologiesdeveloped by the private sector. For example, solarpower is becoming increasingly available in theregion with the innovative work done by someenterprising companies, such as Solar ResearchDesign that operates two factories in Malaysia. ItsMicrosolar heaters channel water through optimallyarrayed tubes to produce hot water even on cloudydays and the heated water is also used to compress acoolant, typically an ammonia mixture or lithiumbromide, which is then sent to indoor fancoils. Thecooling capacity of these systems is similar to aconventional 750 kW air-conditioner. These productshave been particularly successful in rural areas thatlack connections to electricity transmission systems.

3. The New Generation of Clean TechnologiesIn the developed countries of the region, the

transition is underway from the first-generationenvironmental technologies (pollution abatement and“end-of-pipe” cleanup technologies) to the newgeneration of technology systems that includes boththe “hardware” of clean technology and the“software” of improved environmental managementsystems.

Such technology is typically process-controlledand environmentally benign, using less energy andgenerating less waste. This new technology is linkedto, and integrated with, corporate philosophies orcovenants that bring together environmentalobjectives and economic agenda.

Within the region, Japan is leading the way inpursuing policies to encourage cleaner productionand developing the required new technologies andtechniques. The private sector finances some 60 percent of all research and development intoenvironmental technology and contributes heavily toa number of government research agencies. Japaneseindustry is particularly strong in certain clean energyfields such as photovoltaic cells and fuel cells, and inclean motor vehicle technology. Research andtechnology development for new clean technologycars is aimed at developing electric hybrid cars, whilstsimilar research is underway in the Republic of Koreawhere Hyundai is developing a fuel-cell car. Thesedevelopments are likely to be boosted if policyincentives to control increasing urban vehicularemissions are introduced.

In Singapore, ST Microelectronics is committedto water conservation through an annual reductionin water consumption of 5 per cent. The companyhas already cut water consumption by 34 per centover the past six years, despite an increase inproduction of some 60 per cent. The company hasalso reduced its annual use of sulphuric acid by95 per sent through a combination of recycling andreprocessing.

Across all industrial sectors, small andmedium-sized enterprises, which contributesubstantially to overall pollution levels, are least ableto shift to cleaner technology. In India, more than2 million small enterprises account for about half thecountry’s industrial output and 60 to 65 per cent ofits industrial pollution. A similar breakdown ofindustrial output and pollution contribution emergesfrom analysis of the small and medium enterprises(SME’s) in other developing countries of the regionincluding Bangladesh, People’s Republic of China,Indonesia, Pakistan, the Philippines, the Republic ofKorea and Sri Lanka. Although operating in allsectors, SME’s are particularly numerous in the textile,garment, wood product, food processing, leatherproduct, fabricated metal, component and equipment,rubber and plastic product, pottery, printing andpublishing sectors.

4. Technology TransferThe transfer of clean technology from

developed countries to developing countries hasbeen extremely slow. For example, energy efficienttechnologies, including thermal storage, energy-efficient lighting, distributed generation systems,variable-speed motors and drives, have been availablein industrial countries for several decades. However,even within operating factories and subsidiaries ofthe same company, the transfer of cleaner technology

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from the developed to the developing countries hasbeen hampered by under-investment and by thetransfer of “obsolete” technology (in many cases thismay be translated as “no longer complying withenvironmental standards” of the developed country)from one country to another.

In some developed countries, private sectorinstitutions have been set up to aid the rapid andefficient transfer of environmental technology. Forexample, Austemex, the export arm of theEnvironment Management Association of Australia,cooperates with Environment Australia in developingstrategies for transferring clean technology to thewider region (Australia Report to CSD). Australiaalso has a Cleaner Production Case Studies Directory,which has been developed to give industry in othercountries easy access to case study information oncleaner production measures used in a wide varietyof industries.

5. R & D PotentialAlthough much of the R & D for cleaner

production is undertaken by the private sector,collaborative R & D is also taking place betweengovernments and the private sector. In India, forinstance, the National Environmental EngineeringResearch Institute is developing a wide range ofenvironmental technologies to improve pollutantmonitoring and the recycling and management ofurban and industrial solid wastes. In Indonesia, thegovernment, acting through the EnvironmentalImpact Management Agency, is providing assistancefor factories to develop cleaner and less pollutingtechnology, whilst in Thailand the textile, pulp andpaper, electroplating, chemical and food industriesare all involved with government in promotingcleaner production initiatives.

Despite the growth in R & D, these initiativeshave a relatively small effect given the scale ofindustrial activity of the region. In Indonesia, forexample, major industries are using up to 30 per centmore energy per unit of output than comparableindustries in Japan and the demand for electricity isincreasing at 15 per cent per year. The situation isnot much different in other developing countries ofthe region. Given the perceived lack of resourcesavailable, the potential savings from cleaner and moreenergy efficient technologies are enormous. A studyby the Lawrence Berkeley Laboratory estimates thatdeveloping countries could avoid spending US$1.7trillion on new power plants, oil refineries, coal minesand all the attendant infrastructure by spendingUS$10 billion a year over the next thirty five years toimprove energy efficiency and conservation.

C. Use of Environmental Management Systemsand TechniquesEnvironmental management techniques

including environmental impact assessment,environmental auditing, adhering to ISO standards,life cycle analyses, environmental monitoring,performance evaluation, and reporting are being usedincreasingly by the business and corporate sector inthe region. Corporate groups and businessassociations have started to improve theirenvironmental performance either to maximizeprofitability or in response to public pressure,demands of foreign markets (ecolabelling and traderelated standards), or on the instructions of their peersor parent companies.

1. Environmental Impact Assessment andEnvironmental AuditsEnvironmental impact assessment (EIA) is a

required process in many of the counties of the regionfor the planning and permitting of new projects.Whilst the type and scale of project or developmentrequiring formal EIA varies across the region, manyprivate sector companies choose to commission EIA’s,or related studies such as environmental baselinestudies, for potentially controversial projects whetherthese require the formal process or not. The resultsof these “informal EIA’s” are then available to supportany public consultation or funding applications thatmay arise.

Environmental auditing is a tool used to gaugethe environmental performance of a facility orcompany against predefined performance criteria. Insome countries of the region, environmental auditsare required as part of the pollution control processor as a follow-up to the EIA process to ensure thatpredictions, recommendations and commitments arefully integrated during the construction, operationand decommissioning phases of the newdevelopment. Environmental auditing is also widelyused as one of the suite of tools in the development,implementation and maintenance of ISO 14000environmental management systems (see below).

However, the major growth in environmentalauditing has been for the internal use of individualprivate sector organizations where it has beenemployed as a tool for determining the environmentalrisks and potential liabilities associated with specificprocesses. In particular, environmental auditing hasbeen applied as part of the mergers and acquisitionsprocess to provide potential investors with key dataon the current level of compliance of a potentialinvestment venture with a range of local, national,international and corporate criteria. Much of the

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investment and joint venture decisions accompanyingthe entry of international companies into People’sRepublic of China, India, Pakistan, the Philippines,Sri Lanka, Viet Nam and many other countries in theregion over the past ten years has therefore beeninformed, in part, by the results of environmentalauditing.

2. ISO StandardsCertification to ISO quality and environmental

management standards by the private sector in theregion is on the increase. The environmentalmanagement standard (ISO 14000) covers:(a) environmental management systems;(b) environmental auditing; (c) environmentallabelling; (d) environmental performance evaluation;(e) life cycle assessment; (f) terms and definitions;and (g) environmental aspects of product standards.ISO 14000 augments clean technologies and wastereduction techniques by providing a comprehensiveand integrated system of environmental managementthat takes into account managerial commitment, theestablishment of environmental policies, objectivesand mission statements, data collection, cost-effectivetechnology selection and implementation, employeetraining and programme monitoring and certification.It is expected that ISO 14000 will create a “pull” factorthat will also affect suppliers, contractors, customers,bankers, creditors and other parties. The regionalshare in worldwide ISO 14000 certification is givenin Figure 13.6, whilst progress made towardscertification is shown in Figures 13.7 and 13.8.

Since the publication of ISO 14001 standard inDecember 1996, the number of companies or sitescertified with the standard worldwide has grown, ofwhich almost 50 per cent of the top 20 registrationsby country (as of November 21, 1999) were from theAsian and Pacific Region.

The process of institutionalizing therequirements of ISO 14001 has begun in manycountries of the region. For example, in the Republicof Korea, the ISO 14000 was introduced by theMinistry of Trade, Industry and Energy (MOTIE)under the legal basis of the “Environmentally-Friendly Industrial Structure Promotion Act” and theKorean Chamber of Commerce has been designatedas the “Headquarters for Promotion ofEnvironmentally Friendly Industry”. In Thailand,the Ministry of Industry has established the NationalAccreditation Council within which a subcommitteeis responsible for ISO 14000 issues. Malaysia andSingapore have also established nationalorganizations to oversee certification to ISO 14000,whilst the Philippines is adopting ISO 14000standards as part of their national standards. In Fiji,the Ministry of Commerce, Trade and Industry is

Figure 13.6 Share of Asia and the Pacific inWorldwide ISO 14000 Certification

Figure 13.7 ISO 14000 Certification Growth in theRegion from 1995 to end of 1998

Source: International Organization for Standardization 1998

Europe54.55%

Africa West Asia1.75%

Asia and the Pacific35.7%

North America6%

Central and South America2%

Figure 13.8 ISO 14000 Certification Growth inSelected Countries of the Regionfrom 1995 to end of 1998


Dec. 1995 Dec. 1996 Dec. 1997 Dec. 19980

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Box 13.3 Sustainable Corporate Management and ISO 14000 in People’s Republic of China

Chinese domestic firms follow closely government guidance in environmental management. Most firms with more than 100staff have at least one full time environmental protection officer, whilst larger firms have departments responsible for environment,health and safety. Until recently Chinese corporate environmental management, however, has been reactive, responding to regulatorypressures only. The recent crackdown on polluting private sector enterprises has forced the environmental issue higher up thecorporate agenda.

At both the local and national levels, the Chinese government is increasingly expecting firms with foreign investment to leadthe way in responsible environmental management. Expectations of pollution control standards are generally higher from foreignjoint ventures and often, the Chinese look favourably on environmental protection investment, training and management by foreignfirms as a way of raising the level of domestic industry and transferring skills. Nevertheless, some large domestic Chinese firms arealso facing increased pressure to improve their environmental performance. The Jinan Refinery (in Shandong Province) of thestate-owned China Petrochemical Corporation is one such large facility in the country and the company is facing strong regulatorypressure to improve its environmental performance over the next five years. It has already invested 13.5 per cent of the capitalemployed in the period 1990-95 on pollution control and has built a 150 person strong environmental protection unit. Its main issuesare air emissions and organic contaminants in wastewater. The company has built emissions control facilities in its asphalt productionunit and several wastewater treatment plants.

With growing domestic pressure and the added expectations of the international markets, there is a substantial interest in theChinese corporate sector towards the development of the ISO 14000 corporate environmental management standards. The countryhas an opportunity to actively participate in the ongoing ISO 14000 process since many important issues relevant to Chinese tradeinterests remain to be resolved. In particular, product oriented standards for environmental labelling, life-cycle assessment andenvironmental characteristics of product policies are still being developed. Further, ISO 14001 provides an excellent opportunity toimprove the environmental performance of companies in People’s Republic of China. There is growing experience internationallythat systematic approaches to improve corporate environmental performance (increasing efficiency, reducing resource use andminimizing wastes and polluting emissions) can improve government relations and public image, reduce costs and expand marketopportunities. However, because ISO 14001 does not establish performance standards on its own, environmental performanceimprovements will depend on the strength of a company’s environmental policy and the domestic environmental policy regime.Moreover, People’s Republic of China will need to overcome a cost barrier to the implementation of the standard, particularly insmall and medium size enterprises.

Since the ISO 14001 standard will involve significant costs which industry cannot incur all at once, a major challenge forgovernments is to choose industry priorities based on calculations about where best to make domestic environmental improvements,protect export markets and pursue new export opportunities.

In order to assist in this venture People’s Republic of China officially adopted the ISO 14001 environmental managementstandard on 1 April 1997 and has officially designated an organization to administer China’s domestic accreditation process. Theaccreditation body comprises representatives from over 30 government bodies and is headed by a top official from the StateEnvironmental Protection Administration.

Source: ENFO News, December 1997

working on a Memorandum of Understanding withAustralia and New Zealand on the effectiveenforcement of international standards that willaddress environmental issues, and in China ISO 14000is receiving increasing interest with an accreditationadministration comprising over 30 governmentbodies (see Box 13.3).

3. EcolabellingEco-marks or Ecolabels are attached to, or

indicated on the packaging of, products to indicatethat they are either manufactured with minimumenvironmental impact or that they are designed tooperate in a manner that reduces impacts to theenvironment or that over the product life-cycle (i.e.sourcing of raw materials, manufacture, packaging,distribution, use and disposal) they impose less ofan environmental burden than similar products.

Following a trend that has been establishedinternationally (particularly in Western Europe), thelabelling of products manufactured and traded in theregion is increasingly including environment relatedinformation. Institutions set up to formalize andstandardize ecolabels in the countries of the region,typically include representative of business andindustries; some prominent recent examples of formalEcolabelling are given in Table 13.4. In Republic ofKorea, an Eco-Mark Association has been establishedas a private body composed of representativesfrom consumer organizations, environmentalorganizations, businesses and distribution sectors, aswell as environmental experts and journalists.Similarly, in Singapore Ecolabelling is through aGreen Label Scheme that sets specific guidelines forthe manufacturing, distribution, usage and disposalof products. Japan also has an Eco-Mark System,

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which includes a continuous system of surveying andmonitoring public opinion with a view tounderstanding consumer trends and of ensuring thatconsumer information is in line with publicexpectations.

Manufactures and suppliers of a range ofnatural resource products are also increasinglyresponding to market demands for ecolabelling.There is a growing demand for timber that is certifiedas originating from sustainably managed forestresources and certification through the ForestStewardship Council (FSC) and ISO 14000 isincreasing throughout the region. Similarly, theincreasing international market for organicagricultural products has led to a range of labelingschemes linked to international certification bodies.

4. Corporate ReportingInternational consumer and shareholder

pressure is beginning to call for global accountabilityand reporting, whereby the private sector is requiredto measure, reporting and, increasingly benchmark,their social, environmental and economic impact ineach country in which they operate. This has led toa number of companies establishing (and mostimportantly enforcing) corporate environmentalstandards, which frequently require levels ofenvironmental performance that is higher than therelevant environmental standards of the country ofoperation.

This process of increasing global accountabilityhas been aided in recent years by the launching ofthe Global Reporting Initiative (GRI) by the Coalitionfor Responsible Economies (CERES) in late 1997

(Box 13.4). This initiative draws upon andcomplements a number of the reporting systemscurrently being employed within the region,including those of the World Business Council forSustainable Development (WBCSD), Eco-efficiencyMetrics, World Resource Institute (WRI) GreenhouseGases Metrics and Innovest. A comparative analysisof these and other initiatives on measuring andreporting aspects of corporate sustainability in givenTable 13.5.

5. Environmental Management in SMIs/SMEsEfforts to promote environmental management

and reporting in small and medium size industriesare also being strengthened. In Sri Lanka, the WorldBank is funding technical assistance to the CentralEnvironmental Authority to develop environmentalcodes of practice for small industries. In Thailand, aPollution Prevention Fund for small and mediumscale industry has been established and is expectedto serve as a catalyst for moving industry towards amore sustainable pattern of development (ThailandReport to the CSD).

In Japan, the Japan Environmental Corporation(formerly the Pollution Control Service Corporationor PCSC) has a special mandate to provide financialand technical assistance to SMEs which havedifficulties due to their limited financial andtechnological capacity to engage in special projectsfor environmental clean-ups. The Republic of Koreahas also designated 8 research institutions as “cleanerproduction technology assistance centres” to providetechnological assistance to small and mediumentrepreneurs (Korea Report to the CSD). TheNational Cleaner Production Centre project in Indiaassists the National Institute of Small-Scale IndustryExtension Training in developing cleaner productioncourses.

D. Business and Government PartnershipsSustainable development is being actively

promoted by public private partnerships in a numberof countries. At the policy level, the private sector isoften included on government committees andinter-agency councils. In India, industry associations,such as the chambers of commerce, are members ofthe National Environmental Council, whilst theprivate sector is represented on Thailand’s NationalEnvironmental Board and representatives of thebusiness sector in the Philippines are members ofthe Philippine Council for Sustainable Development.In Sri Lanka, a forum for improving dialogue betweengovernment agencies and the private sector for thepromotion of sustainable development, known as theLanka International Forum on Environmental andSustainable Development (LIFE) has been established.

Table 13.4 Prominent Eco-Labels instigated in Asiaand the Pacific

Country Eco-LabelYear of

Establishment

Australia Environmental Choice 1991Australia

PR China PR China Environmental 1994Labeling Scheme

India Eco-Mark Scheme 1991

Indonesia Ecolabelling Scheme 1993Indonesia

Japan Eco-Mark Scheme 1989

Republic of Korea Eco-Mark Scheme 1992

New Zealand Environmental Choice Scheme 1990

Singapore Singapore’s Green Labeling 1992Scheme

Thailand Thai Green Labeling Scheme 1994

Source: International Institute for Sustainable Development 1996

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Box 13.4 The Global Reporting Initiative: An Emerging Tool for Corporate Accountability

Business economic power is expanding in the global economy. Many NGOs argue that with power should come responsibility,and with responsibility there must also be accountability, not only to shareholders, but also to others with a stake in businessactivities. A multiyear project on corporate reporting has been launched by the Coalition for Environmentally Responsible Economists(CERES). The Global Reporting Initiative’s (GRI) core mission is to establish, through a global, voluntary and multi-stakeholderprocess, the foundation for uniform corporate sustainability reporting worldwide. Over time, GRI seeks to elevate corporatesustainability reporting practices to a level equivalent to and as routine as financial reporting and to design, disseminate andpromote a globally applicable standardized reporting format. Drafted in March 1999, the GRI issued a draft set of SustainabilityReporting Guidelines for comment and pilot testing.

The draft Reporting Guidelines document has nine points comprising CEO Statement (describes a company’s understanding ofand commitment to sustainability); Key Indicator (provides a summary of key social, environment, and economic performanceindicators); Profile of Reporting Entity (provides an overview of the reporting entity and scope of the report); Policies, Organization,and Management Systems (a statement of the organizational and management processes intended to met sustainability); StakeholderRelations (information on the processes and methods for engaging stakeholders); Management Performance (indicators of operationalperformance in key aspects of sustainability); Operational Performance (indicators of operational performance in key aspects ofsustainability); Product Performance (indicators of product performance in key aspects of sustainability); Sustainability Overview(description of how sustainability is integrated in decision making and performance).

The draft GRI reporting guidance proposes three complementary reporting styles to help understand the interrelations andbalances among the three dimensions of sustainability:

• Systematic Accounting and Reporting – A total approach comprising economic, social, and environmental accounts includingflows and accumulated balances of values. Systematic accounting and reporting requires a sophisticated knowledge of causesand effects within and among the environmental, economic and social dimensions. Though not yet well developed, it presentsa model for future sustainability reporting.

• Thematic statement – The enterprise’s interpretation of a conceptual theme – a core issue or challenge – that relates in some wayto all dimensions of sustainability. Sample themes include diversity, added value, productivity, integrity, health, and development.

• Case Studies – An exploration of an enterprise’s decision making in a particular situation, treating the interrelations ofenvironmental, economic and social aspects in terms of how it manages specific situations in the past, present, or future.

On face value, the GRI reporting system appears quite pragmatic however, the real test of its success in the Asian and PacificRegion will come with its applications particularly by the firms in the developing countries of the region.

Source: GRI’s website: http://www.globalreporting.org/

Table 13.5 A Review of Various Initiatives on Measuring and Reporting Aspects of Corporate Sustainability

Initiatives M R 3rd Party Social Env. Econ. Inter. ConstituencyVerification Sustainability

WBCSD Eco-Efficiency Metrics ✔ ✔ Business

CERES ✔ ✔ ✔ Multi-stakeholder

Social Accountability ✔ ✔ (C) ✔ Multi-stakeholder

SA 800

UK Ethical Trading Initiative ✔ ✔ Not Yet ✔ Multi-stakeholder

European Eco-Management & ✔ ✔ ✔ Inter-GovernmentAudit Scheme (EMAS)

ISO 14031 EPE ✔ ✔ (fin) Multi-stakeholder

NEF Quality Scoring Framework ✔ ✔ ✔ NGO

WRI/WBCSD GHG Protocol ✔ ✔ ✔ Multi-stakeholder

UNCTAD ✔ ✔ ✔ (fin) Inter-Government

CEFIC ✔ ✔ ✔ Business

VFU ✔ ✔ ✔ Business

sustainability/UNEP ✔ ✔ ✔ Business/Inter-Government

NRTEE ✔ ✔ Multi-stakeholder

GRI ✔ ✔ Not Yet ✔ ✔ ✔ ✔ Multi-stakeholder

M = Measurement; R = Reporting; C = Certification; fin = Financial

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The private sector has also been included inthe Inter-Agency Committees which formulate,review, and revise EIA activities, regulations and otherpolicy elements in a number of countries in theregion. For example the Business Council ofAustralia, Minerals Council of Australia, and theNational Association of Forest Industries regularlyinteracts with the government through the AustralianIntergovernmental Committee on EcologicallySustainable Development.

Across the region, public private partnershipshave aided the initiation and successfulimplementation of new environmental managementschemes. For example, such a partnership launchedthe Industrial Ecowatch Project in the Philippines,under which factories are visited and rated onenvironmental performance and the results of thisprocess are made public. The initiative is foundedon an agreement between the government and 23industry associations representing 2 000 companiesacross the country. In the Republic of Korea publicprivate partnerships have allowed a sharing ofexpertise that has led to greater cost-effectiveness inimproving environmental performance. In NewZealand, the oil industry, in conjunction with relevantgovernment agencies, has produced a guide to theinstallation of underground storage tanks. This workwill be extended to address the removal of old tanks,site remediation and sampling standards (NewZealand Report to CSD).

Public private partnerships have provenparticularly effective in situations where existingservice delivery is either too costly or inadequate and

where private sector participation provides anopportunity for enhancing efficiency (and thuslowering costs) and mobilizing private investment(and thus expanding the resources available for urbaninfrastructure and equipment).

BUSINESS COUNCILS, CHARTERSAND ETHICS

A. World Business Council for SustainableDevelopment (WBCSD)The World Business Council for Sustainable

Development (WBCSD) was formed in January 1995through a merger between the Business Councils forSustainable Development (BCSD) and the WorldIndustry Council for the Environment (WICE). TheWBCSD has 120 international companies from30 countries comprising of 20 major industrial sectorswithin its coalition and also benefits from a globalnetwork of national and regional Business Councilsfor Sustainable Development (BCSDs) such as thoseestablished in Indonesia, Malaysia and Thailand(see Box 13.5). Elsewhere, in lieu of BCSDs, are theConfederation of Indian Industry in India, thePhilippine Business for the Environment in thePhilippines and the Vernadsky Foundation for theRussian Federation.

The aims of the WBCSD are to promote:Business leadership – to be the leading businessadvocate on issues connected with environment andsustainable development; Policy development – toparticipate in policy development in order to create

Box 13.5 Business and Environment Programme in Thailand

The Business and Environment Programme is designed to encourage the business community in Thailand to actively participatein meeting the country’s environmental challenges through the adoption of sustainable practices i.e. minimizing the use of naturalresources, preventing pollution, and developing green products with a minimal impact on the environment.

The programme is being implemented by the Thailand Environment Institute (TEI) and the Thailand Business Council forSustainable Development (TBCSD). The Council consists of fifty-five members from varied sectors of the business community. Theobjectives of the TBCSD are to promote the concept of “Sustainable Development” amongst business leaders and to disseminateinformation on sound environmental practices to the business community and the general public. In order to ensure businessleaders take a leading role in preventing and solving environmental problems, the TBCSD encourages the integration of the “SustainableDevelopment Approaches” into its members corporate operation and management. It is believed that these approaches willeffectively improve the environmental performance of commercial organizations and also encourage other members of the businesscommunity to recognize the advantages of sustainable development.

During the past year, the Programme continued to act as the Secretariat for the Thailand Business Council for SustainableDevelopment. In this capacity, it managed the implementation of the “TBCSD Sustainable Development Approaches” and otherprojects sponsored by members of the Council. One such TBCSD sponsored project, “Coal and its Impact on the Environment”,undertaken by the Policy Research Programme, in consultation with the TBCSD Working Group, has been completed and a numberof other projects are in the pipeline. The on-going efforts and actions on waste reduction, energy efficiency and pollution preventionare likely to provide a competitive advantage, help strengthen business community’s/corporate citizens reputation regardingenvironmental issues and enable the risk of potential liabilities to be managed proactively.

Source: www.tei.or.th/bep/Bep.cfm

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a framework that allows business to contributeeffectively in sustainable development; Best practice –to demonstrate progress in environment and resourcemanagement in business and to share leading edgepractices among members; and Global outreach – tocontribute through its global network to a sustainablefuture for developing nations and nations intransition.

The WBCSD has also developed someconsensus in the definition of Corporate SocialResponsibility (CSR) as “the commitment of businessto contribute to sustainable economic development,working with employees, their families, the localcommunity and society at large to improve theirquality of life.” From WBCSD members in the region,a variety of emphases have emerged. In thePhilippines, the focus is on determining the real needsof stakeholders, defining ethical behaviour, buildingpartnerships and having a visionary and leading role.In Thailand, the emphasis is on the concept that thebigger the company, the bigger the obligation; theimportance of environmental mitigation andprevention; the need for transparency; the importanceof consumer protection; awareness of and change inpeople’s attitudes towards the environment; and therelevance of youth and gender issues.

It is important to note, however, that WBCSDitself recognizes that CSR is not yet high on thebusiness agenda of many companies. For examplein Thailand, owing to the vulnerability of the privatesector, CSR is seen more as a luxury item particularlyby businesses that have their survival at stake.Nevertheless the importance that Thai society placeson the environment has led to recognition of CSRand a development of the desire to increase CSRawareness and build partnerships between NGOs,government and business. Companies in thePhilippines have also started to see CSR as helpingmeet their business agenda since the private sectorhas traditionally played an important role especiallyin filling the gaps where government is weak orunable to provide effective leadership.

Those who subscribe to the concept of CSRhave already realized its link to long term profits. Inthe Philippines many companies have noted that“sustainable business cannot be achieved byfollowing the traditional thinking that the only thingbusiness has to do is to make a profit … it now meansnot only making a profit but also managing issuesthat concern many stakeholders. Managing theseconcerns will enable the company to continue to makea profit.” and that “CSR is the backbone ofsustainability in the long run.” These developmentsillustrate the growing realization within the privatesector of the need to internalize the environmentalcosts associated with their business activities.

B. Business Charters and EthicsA recognition of the private sector ’s

responsibility to the environment has also led to thedevelopment of business charters and ethicsstatements including the Business Charter forSustainable Development of the InternationalChamber of Commerce and the Principles of theCoalition for Environmentally Responsible Economies(CERES). The signatories to these documents in theAsian and Pacific Region have pledged to put intopractice the principles of environmental managementfor sustainable development which includerecognizing the need for long-term economic growthand environmental sustainability; developing andproviding products and services that have no undueenvironmental impact, are safe, are efficient inconsumption of energy and natural resources, andcan be re-used, recycled, or disposed of safely;protecting the biosphere, preserving biodiversity andsafeguarding habitats; informing and working withthe public and creating dialogue with stakeholders;working towards self-regulation and a demonstratedenvironmental commitment by corporatemanagement; and, undertaking environmentalauditing to measure progress.

Developed countries of the region have alsodevised country-specific business charters, ethicsstatements and programmes for sustainabledevelopment. For example, the Business Council ofAustralia has an environmental committee and hasdeveloped position papers on a business perspectiveon sustainable development. Similarly, in Japan, theFederation of Economic Organizations (Keidanren)compiled the Keidanren Global Environment Charterthat prescribes action standards for Japaneseenterprises. In the Republic of Korea, theenvironment committee of the Federation of KoreaIndustries (FKI) comprises seven member companiesand environmental experts and has developed andpromoted a code of environmental conduct.

A good example of a sectoral code of practiceis tourism, where a variety of codes have beendeveloped. For example the Ecotourism Associationof Australia, in consultation with the AustralianTourism Operators Network and Tourism CouncilAustralia, finalized the National EcotourismAccreditation Programme (NEAP) in 1996. TheFederal Government provided funding for thedevelopment of the NEAP, including a feasibilitystudy, development of criteria and a pilot project,although since the initial establishment funding, theprogramme has been entirely industry managed andfunded.

In developing countries such charters andcodes of conduct do exist but are not so common.An example is the Bangladesh Textile Mills

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Associations and the Bangladesh GarmentManufacturers and Exporters Association which haveagreed to develop a social and environmental codeof conduct for their members.

C. Voluntary Action and AgreementsCommunity pressure and increasing legislative

scrutiny have led to companies or industryassociations taking “voluntary” action on behalf ofenvironmentally sustainable practices. For example,the Bac Giang Chemical and Fertilizer Company inViet Nam took voluntary action to prevent emissionsof ammonia and other gases following concern thatleaks from the factory’s outdated plant werethreatening the company’s long term viability andthe local environment. The result was a reduction ofcosts by 40 per cent and an environmental award in1997 by the Viet Nam Labour Union for being the‘cleanest and greenest’ company in the sector.

The chemical industry in Australia hasundertaken a voluntary programme to improve thehealth, environmental and safety performance of itsoperations. The chemical industry in India has alsosupported the development of a voluntary code ofethics on the international trade on chemicals.

D. Recognition and AwardsIndustry and business are also supporting and

promoting improved environmental performancethrough the funding of awards, competitions andconducting performance surveys. For example, theSingapore Environment Council awards an annualEnvironmental Business Award. Another organizationthat helps to support environmental awards is theJapan Shipbuilding Industry Foundation, which hasmade an endowment to finance the SasakawaInternational Environment Prize (which is awardedto individuals who have made outstandingcontributions to the management and protection ofthe environment). Similarly, the Asahi FoundationBlue Planet Award goes to best researchers in thefield of environment and the foundation alsoconducts surveys on environment to analyse newtrends and needs in environmental management.

PRIVATE SECTOR AND CONCERNSOF THE 21ST CENTURY

A number of established and emergingenvironmental foci can currently be discernedthrough the actions of the private sector in the Asianand Pacific Region including forest management,genetic engineering, growing tourism and meetingthe backlog of environmental services. For example,

the private sector is increasingly being brought intoplantations and forestry management. Some sectorsof the business community have also shown a levelof maturity in their relationship with consumersthrough their disclosure and neutrality on the issueof genetically modified food. For example, Jusco,Japan’s leading supermarket chain introduced a lineof GM-free foods and the resulting increase in thesales of these foods illustrated the importance ofdisclosure to consumers. Suppliers of corn snackssuch as Tohato and beer brewer’s Kirin, Asahi, andSapporo also followed suit. A major supermarketchain in Hong Kong, China, Park’n’ Shop plans tooffer its customers a choice by testing store-branditems and labelling them. On this issue, theRockefeller Foundation which has contributedUS$100 million to bio-engineering research nowadvocates a new corporate culture that includessupporting more careful monitoring, open reportingand public participation, to win back public trust.

The tourism sector is an important source ofrevenue to many of the economies of the Asian andPacific Region. Whilst an international industry codeof conduct for tourism has been established, theWorld Travel and Tourism Centre’s EnvironmentCharter and Environmental Guidelines, the challengeis persuading the sectors many travel agencies andtourism related companies to accept and implementthe provisions of these codes (Box 13.6). Within theregion, the Pacific Asia Travel Association (PATA)supports the promotion of environmentally friendlytourism and has developed a regional Code forEnvironmentally Responsible Tourism that demandsthe adoption of necessary practices to conserve theenvironment as well as consider cultural values,customs and beliefs and promote wide communityparticipation in tourism planning. The PATA GreenLeaf ecolabelling scheme was launched as early as1994 and the associated Green Leaf programmeprovides checklists that assist companies in assessingtheir environmental practices and in theimplementation of the PATA Code. PATA alsosponsors workshops and conference for raisingawareness on the importance of sustainable tourismand has a foundation that awards scholarships andgrants, including custom-made programmes formanagers from the Asian and Pacific Region. Thehotel industry, through the International HotelsEnvironment Initiative (IHEI), has publishedEnvironmental Management for Hotels – The IndustryGuide to Best Practice and established its first regionalchapter, the Asia Pacific Hotels Environment,intended to promote environmental awareness andaction in hotels in the region. IHEI has also preparedan environmental toolkit for small and medium-sized

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Box 13.6 International Hotels Environmental Action Plan for the Asian and Pacific Region

Hotels are at the very heart of the travel and tourism business, the largest and fastest growing industry in the Asian and PacificRegion. In 1995, the global industry generated an estimated US$3.4 trillion in gross output, employed 211.7 million people andproduced 10.9 per cent of world GDP. Industry success relies upon the preservation of a high quality environment, hence theidentification of the environment agenda as being of utmost and immediate importance by many industry leaders. By conveningthis meeting in association with UNEP, the hotel industry is continuing to position itself as a leader on environmental managementand sustainable development within the international tourism industry.

The International Hotels Environment Initiative (IHEI) is a network of 11 of the world’s leading hotel chains which aims toimprove environmental performance throughout the industry by promoting the business benefits of action. The Asia-Pacific Councilis the campaign’s regional body and is governed by 16 leading regional hotel chains. The IHEI is coordinated from London by ThePrince of Wales Business Leaders Forum (PWBLF), a group of the world’s leading multinational companies established to take upthe challenge of sustainable development and corporate responsibility in the community.

The meeting on the Environmental Action Plan for Asia and the Pacific was organized by the IHEI and its regional Asia PacificCouncil, the International Hotel Association (IHA) organized a meeting in October, 1996 in collaboration with the United NationsEnvironment Programme (UNEP) to explore potential collaboration between the hotel industry, national hotel associations, governmentand non-governmental organizations. The meeting was the first in a series of regional Hotel Industry Environmental Fora, organizedby the IHEI, the IHA and UNEP. The key elements of the final resolution of the meeting included: hotel business leaders shoulddrive environmental action internally through their own hotel companies and should also support the efforts of associations at thenational level; at the country level, hotel associations should drive environmental education programmes for their members; exchangeof experience between national hotel associations will be facilitated through the IHA; government and national associations shouldwork in partnership to encourage action by hotels. The exchange of hotel environmental best practice and promotion of the businessbenefits of environmental action was acknowledged as vital to any such strategy’s success.

Internationally, progress on these fronts are profiled through “GREEN HOTELIER”, the recently launched IHEI magazine thatnetworks environmental news, information and contacts in the international hospitality industry. The IHA assist national associationsto develop programmes for their members and UNEP will support these efforts through providing technical and educationalinformation through various UN units.

It should be mentioned here however that developing guidelines and code of conduct are not an end by themselves. The realsuccess would lie in their wider dissemination and implementation.

Source: ENFO 1996

hotels. It should be noted that the region alreadyhas hotels that enjoy international reputations fortheir excellent environmental practices (Box 13.7).

The role of the private sector has also increasedin the provision of environmental services andinfrastructure. In India, for example, private sectorinvestment contributes as much as 90 per cent oftotal investment in housing. However, privatizationor the public private partnerships is not without someinherent structural and timeframe constraints. Solidwaste management contracts that are attractive tothe private sector need to be of sufficient duration toallow depreciation of investment, large enough toallow economies of scale and competitive enough toencourage efficiency. For their part, the public sectorneeds sufficient autonomy to enter into multi-yearagreements that capture economies-of-scale, as wellas efficiencies. Unfortunately, many countries of theregion have procurement laws that place lowmonetary ceilings on the sizes of contracts beforeprovincial and central reviews and approval and donot allow contracts to extend beyond one fiscal year.

CONCLUSION

Despite the increasing role being performedby some elements within the private sector in theprovision of environmental goods and services, inself-regulation and in the promotion of environmentalperformance standards, many companies, industriesand sectors in the region remain reactive rather thanproactive in their approach to environmental issues.Despite the numerous examples of proactive pollutioncontrol from within the region, a total of less thanfive per cent of the region’s investment in pollutioncontrol is provided by the private sector. The twomajor constraints to “greening” the private sector,particularly in the developing countries of the region,are weak environmental monitoring and enforcementof existing standards and the lack of greenconsumerism.

The governments of some countries in theregion have begun to recognize the financialopportunities and political advantages that accruefrom stricter environmental management and the

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enforcement of regulations. The consequentialdevelopment of domestic expertise in pollutioncontrol also provides opportunity for environmentalgoods and services firms to develop and export. Thishas led to the promotion of tax incentives, researchgrants, trade missions and promotion of exhibitionsto this new sector.

If the slow current growth in environmentalawareness was to accelerate, the region has thepotential to become one of the largest internationalmarkets for green goods and services. Already, thegroup of countries comprising Japan, Australia, NewZealand, People’s Republic of China, India and manycountries of the ASEAN account for an environmentalgoods and services market of US$80 billion. Withinthese countries there is a proliferation ofenvironmental companies and an increasing numberof initiatives being undertaken by both existing andnew businesses and industrial enterprises.

Corporate groups and business associationshave also started to take steps to improve their

Box 13.7 The Kandalama Hotel: An Eco Experience

The Kandalama Hotel is the first hotel in Asia to be certified under the provisions of Agenda 21 of the Rio Earth Summit as aGreen Globe Hotel. Built next to an ancient irrigation tank and surrounded by tropical dry evergreen forest, the hotel is within SriLanka’s Cultural Triangle and is flanked by two World Heritage sites. The initial public protest due to the sensitivity of the hotel’slocation was overcome through the completion of a formal EIA report and the successful implementation of the report’srecommendations.

The environmentally sensitive design of the hotel avoids disturbance to the existing landform profile and trees, which neededto be removed during construction, were rootballed and replanted. To replant denuded patches of land, a nursery of 3 000indigenous plants was established.

The village community was given the highest priority in the provision of employment and many of the services and utilitiesbrought into the remote rural area were extended to local villages including electricity, roadways, deep wells and biogas generators.

The environmental management of hotel operations are categorized into six key elements: waste minimization (reuse, recyclingand reducing); energy efficiency conservation and management; fresh water resources management; wastewater management;environmentally sensitive purchasing; and social & cultural development. These areas are in accordance with those laid out inAgenda 21 of the Earth Summit.

In order to obtain total participation of hotel staff, environmental committees have been established to cover key factors andevery employee as a member of at least one committee. Environmental conservation is an essential responsibility in everyone’s jobdescription.

The hotel’s environmental policy is available to the public and the environment factors are deeply integrated into the hotelmanagement. Leaflets and brochures with emphasis on environmental conservation are available for all stakeholders. Guests haveaccess to information on nature, special bird watching trails, the surrounding forest, its fauna, flora and its unique bio-diversity.Sustainable practices such as use of rainwater, solar heating panels are currently being employed, whilst windmill pumps and biogasgeneration are planned for the future.

In recognition of the standards of environmental management adopted by Aitken Spence, the operators of the KandalamaHotel, the hotel as won the following environmental awards:

• International Green Globe Award for 1996, 1997, 1998 and 1999;

• Sri Lanka Association for the Advancement of Science Award-1997;

• TRAVTALK’ Award-1997 by the World Tourism and Travel Council; and

• PATA Green Leaf (Gold Award) for Environmental Education-2000.

Source: South Asia Comparative Environment Programme

environmental performance and are employingenvironmental management tools, such as EIA andenvironmental auditing, to assist and standardizethe process. The adoption of the ISO 14000environmental management standard is expanding,ecolabelling is becoming established in certainmarkets and a consensus is emerging on corporateenvironmental reporting. The new wave ofenvironmental awareness is also resulting in theestablishment of business councils and associationsfor sustainable development, as well as businesscharters and codes of conduct. As small and mediumindustries and enterprises dominate output in anumber of industrial sectors, there is also a need toapply greater focus in the promotion ofenvironmental management techniques to membersof this sub-sector.

The “greening” of the financial markets is oftenseen as a key challenge on the road to sustainabledevelopment. As financial institutions, such as jointstock companies, banks, insurance companies and

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financial management firms, begin to takeenvironmental factors into funding considerations,private sector attitude and performance towardssustainability will improve. In the longer term,business may see the inherent convergence ofinvestments that achieve both financial andenvironmental sustainability.

There is a discernible overall trend in thegrowth in private sector investment as a proportionof GDP in some parts of the region. In the wake ofincreasing investment needs and against abackground of declining governmental resources,analysts believe that the demand for privateinvestment will expand significantly in the future.

CHAPTER THIRTEEN - ESCAP

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